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The rollover

Posted December 11, 2013 in Advice Column, Greene County

In today’s day and age of work place benefits, there are two benefits that are important to employees: health insurance and retirement plans.

Although health insurance is certainly the hot topic in the news, I want to discuss your employer-based retirement plan.

Depending on where you work, you may have access to a 401k plan, a 403b plan, a 457 plan, a SIMPLE or a SEP. Whatever plan you have, when you leave that employer, either by retirement or by starting a new job, you generally have the right to take your retirement plan with you via a rollover.

The main reason a person may do a rollover is control. When your funds are invested in the employer-based plan, someone else is determining your investment choices, and if they have done their due diligence, those investment options may be OK. However, in the investment world, there are literally thousands of investment options, which may be available to you under your own IRA. In addition to mutual funds, you may want to invest in an individual stock, bond or exchange traded fund. Or you may want to invest in an alternative investment, such as a real estate investment trust, precious metals or some other commodity. In some cases, having a portion of your funds invested in a bank CD may be appropriate. CDs are FDIC insured, whereas these other investments are not.

Taxation of an early withdrawal
It is important to point out if you withdraw your funds from an IRA or employer retirement plan prior to age 59½ you may be subject to a 10 percent penalty, in addition to federal and state income taxes.  So before you make such a move, please consult your tax advisor first. There are some exceptions to the 10 percent penalty; again consult your tax professional first, to see if an exception applies to you and a rollover fits your situation.

Required minimum distributions
Finally, all retirement plans will require you to start taking distributions the year you turn 70½.  This withdrawal is required every year after you turn 70½. It is based on your age: the older you are, the more you have to withdraw. There is one exception: if you have a 401(k) plan and you are still working, you can put off the required minimum distribution until you quit working. There is a lot to take in when discussing the rollover, so if you have any questions, please give me a call.

Investment Centers of America, Inc. (ICA), member FINRA/SIPC and a Registered Investment Advisor, is not affiliated with Home State Bank. Securities, advisory services and insurance products offered through ICA and affiliated insurance agencies are *not insured by the FDIC or any other Federal Government agency *not a deposit or other obligation of, or guaranteed by any bank or their affiliates *subject to risks including the possible loss of principal amount invested.    ICA does not give tax advice.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S.

Information provided by Timothy J. Heisterkamp, CFP®, Investment Centers of America, 115 W. State St. Jefferson;  515-386-2570.

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